Why Is Wal-Mart Scared Of Apple's iTunes Movie Plans?

from the cheaper-cheaper-cheaper dept

A couple of months ago, we noted how Wal-Mart didn't like the idea of movie downloads, since it saw them as a threat to its DVD sales. Since the company sells 40% of the country's DVDs, it's got some stroke with movie studios, and apparently it's been doing the rounds ahead of Apple's supposed launch of iTunes movie downloads later this month, asking for lower wholesale prices and marketing help for when it launches its own download service. Apparently Wal-Mart is upset that Apple's been able to score movies for a wholesale cost of $14 each, and will sell new releases for $14.99 and older movies for $9.99, when it has to pay $17 wholesale. That $17 figure seems awfully high, given Wal-Mart's retail prices on DVDs, but it's possible it's using them as a loss leader. However, simply asking for lower prices isn't necessarily a great solution. While clearly Wal-Mart sees Apple as a threat, it's not clear that iTunes movies really will be one: if they're sold in the same format as its TV shows, they'll have a fairly small market, limited to owners of the latest iPods, really, since they don't look so hot on bigger screens (though it's possible Apple could announce new devices). Furthermore, Apple has apparently only secured a deal with one studio, Disney, hardly making its store comprehensive. If Wal-Mart really wanted to compete against digital downloads and protect its physical DVD sales, why not get behind tools that make it easy for users to turn physical DVDs into digital files they could move to their computer, or onto a portable player? Somehow, given the movie studios' hamfisted efforts at movie-download services, focused more on restrictions than usability, that seems rather unlikely. Perhaps it shouldn't be that surprising that apparently the only way Wal-Mart knows how to compete is on price.

For most people $14 is still more than the cost of PirateBay/TorrentSpy/Iso Hunt. With AllPeers entering the mix or a foreign site selling movies for pennies, I don't see how this model can work. I guess P.T. Barnum said it best . . . a sucker is born every minute.

14.95 is WHOLESALE???

14.95 is WHOLESALE??? and $9 for an old movie (Carey Grant for ex.) is Cheap? Dude, that's NORMAL! Apple isn't offering amazing bargains, they just get off their asses and walk down the block to Best Buy and check the prices there. Seriously, Wal-Mart is out of touch! (and yes, Tech Serv is across the street from Best Buy on 6th in NYC)

i agree with carlo... the amount of people who are going to buy movies trough itunes (think it's about time to rename that to imedia or something?) is relavity low considering, even when the drm is cracked, nobody is going to want a craptastic resolution that only looks good on handheld movie players except for the people with handheld movie players, which don't play regular dvds... the movie studios know what's up... that's why they're offering low prices, sucker people into buying two formats of the movie they want now that it's illegal to bypass and kind of copy protection...

Mountain out a molehill

However, simply asking for lower prices isn't necessarily a great solution.

What kind of nonsense is that? I'll never understand the contradictions posted here in Techdirt. I keep reading about needing more competition in the broadband sector to keep prices honest and expand available services/options. Yet, here is a company that is actively seeking lower costs and all of a sudden it is not necessarily a 'great solution'. Huh? Last time I looked, asking for lower prices and passing on those lower costs to the consumer is a wonderful solution. It works for me. And it works for many other consumers.

Perhaps it shouldn't be that surprising that apparently the only way Wal-Mart knows how to compete is on price.

Seeing as competing on price has worked pretty darn well for Wal-Mart, why stop? I'm not buying into the whole 'Wal-Mart sees Apple as a threat' statement. The people that buy iPods and use iTunes are not likely people that shop at Wal-mart and vice-a-versa. Wal-Mart want's lower wholesale prices, plain and simple. The people shopping at Wal-Mart respond to lower prices not more 'tools'.

Re: Mountain out a molehill

I keep reading about needing more competition in the broadband sector to keep prices honest and expand available services/options. Yet, here is a company that is actively seeking lower costs and all of a sudden it is not necessarily a 'great solution'. Huh?

Did you read the rest of the post? It makes it clear why prices alone won't be enough to compete, since Apple is offering a totally different product. No one is saying they shouldn't try to get lower prices, and I don't see how you interpret the post that way. What it's saying is that's not going to be effective *for Wal-Mart* and won't be a good enough solution for them.

I'm not sure why you interpret it to mean that lower prices isn't good for consumers. That's not what it says at all. It's just saying there's much more Wal-mart can do if it's serious about competing.

Discount iMovies

I don't know why you say people that would shop on iTunes is not the kind of person to shop in Walmart. I mean cheap music is one thing, but when I can get the Hotshots box set on iMovies out of their $5.99 bargin bin THEN walmart have something to worry about. If they are scared about dropping prices that badly why even have that bin???

I won't even go in to the quality difference between an iTVShow and even regular tv and/or my DVR

Why pay $17.00 for a movie? I pay 22 a month for all I can watch on Starz on demand...

Can't see the logic. Afterall, I can't make backup copies of the movies because of DRM anyway - which functionally makes a DVD useless to me. If I can't take measures to protect the media it's on, I may as well not even worry about getting a 'permanent' copy.

Rent it cheap and if you like it - own.

What about DVD rental services like NetFlix et. al. Dont they affect Walmart etc. sales, and sales for Movie studios in turn? They obviously do ...

Now, download to own movie service, should ideally be combined with a rental service. Rent it, and if you like it own it for the additional fee, the difference amount from the fee for owning it, and voila, there goes the market from Walmart etc BOOOOOM (just like Herr Jobs)

I would pay about $2 for rental and less than $10 for ownership. For all kinds of movies (new, old, recooked, whatever ...)

Walmart Scared of iTunes?

Hello

It seems like paying retail for a rental if i cant burn it to a DVD. I've got a 250 GB hard drive in my computer and even I'm not about to leave something as big as a DVD on my hard drive. So I would most likely only watch them once or twice and get rid of them.

It just doesn't make since to have to pay that much spends hours downloading and then only watch it once or twice. Now if there were a service that would stream movies to my computer and only charge a couple of bucks per viewing I might be interested.

Google Video seems close to that model but they don't have good movies only old TV shows and some anime. But I don't think that the Movie studios will ever go for it and change there business/distrobution model. They are a bunch of foolish little cowardly dinosaurs who are unwilling to embrace the future and change with it.

Netflix will dominate

mp3 is one thing. but downloading an entire movie to watch on a 4 inch screen? only the harden fanboys will do that. even compressed (meaning it'll look like crap on a large monitor), the movie will take up 2-3 gig. How many fanboys will carry around 10 movies on their video ipods?

netflix, once they start streaming video rentals, will eat up this market. Imagine you can stream the latest movie to your laptop overnight, then copy it onto your video ipod and watch it. after 3 days, the movie automatically deletes itself...all for 3 bucks a movie.

Re: Netflix will dominate

...even compressed (meaning it'll look like crap on a large monitor), the movie will take up 2-3 gig.

You forget the iPod uses H.264/AVC. Pirates are used to fit a movie in full SD video definition on a CD (650 MB) using MPEG-4 SP codecs such as XviD.
For iPod definition using H.264/AVC, a size of 200-300 MB for a feature film seems closer to reality.
In fact, with a little more than the size you mention, it's possible to encode a feature film in 720p HD using x264, with a reasonable quality.

Vongo has the buisness Model, if not the content

Granted that Vongo doesn't have the huge selection that Netflix does, but they do have the right business model.

All the movies you can download for $10/month plus free streaming video of the Starz channel. The movies stay on your hard drive until they expire (expiration dates can run from 6 months after release to the year 2013) They also offer Pay Per View, but I don't waste my cash ($3.99 for 24 hours) on those.

Now their technology kinda sucks, their download app is clunky and a memory hog, and the video streams typically freeze up or lag, but the model is dead on.

btw, if you use Vongo, you can close the Vongo app while you are playing a movie or live stream and you will see much better performance.
I run it on a 1.8ghz, 512ram, dedicated movie box with video out to the TV, and I like it much better than NetFlix and the selection is good enough to find something amusing, even if it's not a block buster.
With Vongo, my total TV/movie budget is $25/month for basic cable and Vongo movies. If you already pay $100/month for satalite with all the bells and whistles, then you probably won't gain much by signing up.